1. This is a reference made by the Income-tax Appellate Tribunal of New Delhi under Section 66(1) of the Indian Income-tax Act, 1922 (Act II of 1922), hereafter to be referred as "the Act". The question referred reads :

" Whether the assessee was entitled to the concession contained in Section 15C of the Indian Income-tax Act, 1922, in respect of Ashok Dyeing and Printing Works ?"

2. The assessee is firm Phagoo Mal Sant Ram of Amritsar which had been carrying on business in its name. It opened a new branch under the style of Ashok Dyeing and Printing Works, opening its new industrial undertaking on October 22, 1957. For this undertaking it constructed a factory building at Rs. 47,221 and installed in it machinery of the value of Rs. 1,47,358. Out of the total value of the machinery, a sum of Rs. 1,05,376 represented purchase of old machinery from several parties, and the remaining sum of Rs. 41,982 was the price of the new machinery. So in regard to this new undertaking the assessee (a) set up a new factory building costing Rs. 47,221, and (b) purchased (i) new machinery of the value of Rs. 41,982, and (ii) old machinery of the value of Rs. 1,05,376. In the assessment years 1959-60 and 1961-62, the assessee claimed exemption under Section 15C of the Act. The Income-tax Officer denied this claim saying :

" It appears to me that the assessee's main business was printing of cloth only which in my opinion does not satisfy the condition of Clause (ii) of Sub-section (2) of Section 15C of the Income-tax Act inasmuch as it neither manufactures nor produces any article. Apart from that, it also appears that mostly the old machinery was installed by the assessee in this business. I, therefore, do not allow the assessee's claim."

3. On appeal the Appellate Assistant Commissioner of Income-tax allowed this claim on a conclusion that the new undertaking of the assessee satisfied the conditions laid down in Clauses (i) to (iii) of Sub-section (2) of Section 15C of the Act and nothing in that section debarred the claim of exemption by the assessee in respect of old and second-hand assets used in the undertaking. On appeal to the Income-tax Appellate Tribunal, the order of the Appellate Assistant Commissioner of Income-tax was reversed, restoring that of the Income-tax Officer, The learned Tribunal, after referring to Section 15C(2) of the Act, proceeded to come to this conclusion :

" It will be observed that if machinery et cetera, previously used in other business, was transferred to a new business, then such transferred assets were not entitled to the exemption. In other words, if old assets were transferred by one assessee to his own business or to somebody else's business, then the exemption would be lost. We have already shown that the intention of the legislature is not at variance with this interpretation."

4. On a reference claimed by the assessee the learned Tribunal has referred the question as above.

5. In the Act, so far as relevant for the present purpose, Sub-sections (1) and (2) of Section 15C read :

" 15C. (1) Save as otherwise hereinafter provided, the tax shall not be payable by an assessee on so much of the profits or gains derived from any industrial undertaking to which this section applies as do not exceed six per cent. per annum on the capital employed in the undertaking, computed in accordance with such rules as may be made in this behalf by the Central Board of Revenue.

(2) This section applies to any industrial undertaking which-

(i) is not formed by the splitting up, or the reconstruction of, business already in existence or by the transfer to a new business of building, machinery or plant previously used in any other business. "

6. This apparently is not a case of splitting up or the reconstruction of business already in existence. This is a case under the third part of clause (i) of sub-section (2) of section 15c, for what has been the case of the Commissioner of Income-tax is that the new undertaking of the assessee is formed

by the transfer to a new business of ...... (part old) machinery ... previously used in any other business

. Only two arguments have been urged on the side of the assessee : (a) that this part of section 15c(2)(i) concerns only a transfer or transferring his own building, machinery or plant previously used in any other business of his to a new business of his and this does not concern a case where a transferee has purchased old machinery and set it up in his new business as a new industrial undertaking, and (b) that no rinding has been given by the learned Tribunal that the old machinery used by the assessee in setting up this new industrial undertaking had previously been used in any other business The reply on the side of the Commissioner of Income-tax by the learned counsel is that the part of section 15c(2)(i) relevant here deals with not only the owner of an industrial undertaking transferring his assets such as building, machinery or plant, previously used in any other of his business, to a new business, but also with a transferee of any such assets on the basis of which he sets up an industrial undertaking. The learned counsel has contended that the admitted fact that the machinery of the value of two-thirds was old machinery purchased from various persons, clearly establishes that the same had been previously used in the business of those from whom the purchases were made. He has pointed out that this was never a matter of controversy before any of the income-tax authorities below. The assessee never questioned this matter of fact before any of the authorities.

7. The second argument in the facts and circumstances of the present case, does not prevail because if there was any substance in it, this factual matter would have been a subject of controversy before the income-tax authorities. It has been the common case of the parties that of the total value of the machinery used by the assessee in setting up its new industrial undertaking about two-thirds was expended in the purchase of old machinery from various persons, thereby leaving not the least possible doubt that it was the old machinery previously used in their business by the sellers of the same.

8. In so far as the first argument on the side of the assessee is concerned, it does not prevail because there is nothing in clause (i) of sub-section (2) of section 15c which limits " the transfer " as referred to therein to the act of the transferor alone to his own new business. The expression is used in its ordinary meaning and covers the case of such a person as also another person purchasing building, machinery or plant for setting up his own new business in the shape of an industrial undertaking. clause (i) of sub-section (2) of section 15c first refers to splitting up of an industrial undertaking which can be (i) by its owner for the time being under his own control, (ii) by its owner by the disposal of a part of his industrial undertaking to another person. Similar result can follow also in the reconstruction of an already existing business. The position is not different so far as the third part referring to " the transfer to a new business of building, machinery or plant previously used in any other business." is concerned. There is no justification for confining this part to the owner as transferring to a new business any building, plant or machinery previously used by him in his any other business. He may do that. The same result may come about by another person making a purchase of the previously used building, machinery or plant in the business of the vendor, when that other person sets up his own industrial undertaking with such previously used building, machinery or plant. The learned counsel for the Commissioner of Income-tax in support of his position has referred to Steelsworth Lid. v. Commissioner of Income-tax. The case deals with Section 15C(1) and (2) (i) of the Act before its amendment of Clause (i) of Sub-section (2) of that section by the Finance Act of 1959 (Act 12 of 1959), when in place of the words " previously used in any other business ", as appearing at present, the words used were " used in a business which was being carried on before the first day of April, 1948. " The assessee in that case had started a new industrial undertaking with old machinery purchased that had been used in a business which was proved to have been carried on before April 1, 1948, and the learned judges held that the case was completely covered by clause (i) of sub-section (2) of section 15c of the Act and the exemption under Sub-sec tion (1) of that section was not available to the assessee. The case is close parallel to the present case and supports the opinion as already expressed above. The learned counsel for the assessee has relied upon this observation of the learned Chief Justice :

" It is not a case where the industrial undertaking, that is, its manufacturing process, was carried on with the help of any new plant, though some parts of it may have been old"

.

9. And the learned counsel urges that this case rather than going against him supports his argument. I do not think that the observation of the learned Chief Justice, upon which the learned counsel relies, supports his case so far as the facts and circumstances of the present case are concerned, because here it is not only some parts of the new undertaking which are old, but two-thirds of the machinery for the undertaking is an old machinery purchased from various other persons. So the first argument on the side of the assessee cannot be accepted.

10. In the present case a substantial part of the machinery of the undertaking has been an old machinery purchased from other persons and the consequence, as already stated, is that it was previously used for their business by those other persons. So the argument on the side of the assessee cannot be accepted that it is an industrial undertaking not formed by the transfer to it of machinery (substantial part of it old) previously used in the business of those from whom the same was purchased. The case falls under clause (i) of sub-section (2) of section 15c and the exemption as claimed by the assessee under sub-section (1) of that section is not available to it. The answer to the question referred to is thus in the negative. The assessee will bear the costs of the Commissioner of Income-tax.

Prem Chand Jain, J.

11. I agree.